Co-head of Barclays Capital quits after credit trading hit for £1.3bn

One of Bob Diamond's two lieutenants at Barclays Capital resigned yesterday in a move that appeared to suggest its chief executive was paying the price for £1.3bn of losses in its sub-prime mortgage unit.

The investment banking arm of Barclays had been run by two co-heads - Grant Kvalheim and Jerry del Missier - since 2005, when Diamond was elevated to the bank's main board.

Diamond told staff yesterday that Kvalheim had decided to "take time away from the industry" and would be leaving at the end of the first quarter. This leaves Del Missier as the sole president of what has been one of the fastest-growing divisions of Barclays in the last two years. An American, he had been based in London but will now move to New York, where Kvalheim had been based. Kvalheim will leave at the end of the first quarter and some of his responsibilities will be taken on by Diamond, who is also chief executive of Barclays' investment management and private banking businesses.

Del Missier will now be regarded as the likely successor to Diamond should his boss move from Barclays Capital. Diamond is on track to receive a £14.8m three-year performance bonus next month despite the turmoil in the financial markets, which has forced Barclays to write off £1.3bn.

Kvalheim's responsibilities began to be scaled back in September when his credit trading businesses - the part of the operations worst hit by the financial crisis - was handed to Del Missier.

Despite the write-offs, Barclays has revealed that profits in the investment banking arm were higher in the first 10 months of 2007 than they were in 2006.